From the desk of Ed Galvin, Founder & CEO at DC Byte
2024 was defined by twin trends within the data centre sector of exponential growth and challenges with meeting the scale of demand. Three events capture this:
- Blackstone’s $16.4 billion acquisition of wholesale colo operator AirTrunk blew the previous record set in 2021 when KKR and Global Infrastructure Partners acquired CyrusOne for $15 billion.
- Blackstone-backed QTS setting out plans for a monster 1,000MW Cambois campus in Northumberland, England.
- Microsoft in the United States paying for the shuttered Three Mile Island nuclear power plant to reopen to supply power to its data centre schemes.
At the core of all of this is the relentless demand for capacity for the Artificial Intelligence arms race among the hyperscalers, in addition to the continuing growth in demand for public cloud, content and social media applications. The promise of large language models (LLMs) to instigate a fourth industrial revolution has led to unprecedented levels of investment in digital infrastructure. The top five US hyperscalers are spending more than $331.2 billion on capital projects. Much of this development has been constrained by supply as data centres have already been consuming large amounts of power even before the AI boom. This includes constraints in both the power supply and the mechanical and electrical equipment that form part of a data centre’s critical infrastructure. As a result, rents have climbed significantly in 2023 and 2024.
So how has this impacted us? As the leading primary research provider in our industry, it has been our mission to quantify the movements of 7,500+ data centre developments globally. We look back proudly on the past 12 months of growth:
- We formally opened our US office in mid-2023, and it is now firmly established as our third regional hub alongside London and Singapore.
- The Americas team, led by Colby Cox, grew to eight members and tackled the monumental task of mapping data centre developments across North and South America.
- Our global headcount increased by 20%, with key hires across research, product, and customer success. Today, 50% of our team is focused on research, and 25% on product and engineering, underscoring how seriously we as a business take research and development.
With all hands on deck, we’ve achieved the following accomplishments in 2024:
- At the time of writing, our analysts have completed 29,696 quarterly site reviews and 2,400+ in-person site inspections since the start of the year.
- We shared our analytics at over 60 speaking sessions across industry-wide conferences and closed-door investor briefings worldwide.
- We released our inaugural Global Data Centre Index 2024, highlighting our observations on the state of the global data centre landscape.
- The APAC team brought home the prestigious Data Centre Market Intelligence Team Award at the 2024 Asia Pacific Cloud & Datacenter Awards by W.Media. This accolade underscores our commitment to excellence and innovation in market intelligence.
Looking Ahead to 2025
Many would speculate on the predictions for 2025 and beyond. Here’s my take, based on the team’s observations on data centre markets around the world.
Ask anyone in the industry what their number one challenge is today, and they will tell you that it’s the issue of power availability. While clustering of data centres was the norm until 2022, the first response to local pinch-points in the grid was to diversify locations. In South East Asia, for example, Johor and Batam have been major beneficiaries of the lack of supply in Singapore. In the UK, the West London cluster extended initially along the M4 motorway corridor to South Wales followed by major new developments in the Liverpool-Leeds-Manchester conurbation. And in the US where Ashburn overspill has benefitted satellite markets such as Richmond VA.
The problem now is that supply is not constrained by grid infrastructure, but by national generation capacity. Hence Microsoft firing up the nukes or OpenAI investing into fusion power. My prediction in 2025 is that there will be a new focus on those markets which have high levels of renewable power generation, or the potential to add capacity with relative ease, but which don’t have a major data centre footprint at present. We will also see much more combinations of data centre developments with large scale power generation – this will create challenges of its own, as we’ve seen in certain markets such as Ireland.
Interest in the data centre industry will grow, expanding among groups outside of traditional real estate funds and developers. Where in the past most of our interest was from VC and private equity, investors who previously saw data centres as an alternative asset class are quickly recalibrating their worldview, especially as traditional ‘safe’ asset classes such as offices and retail have suffered because of increased remote working and online shopping. With traditional investors accepting a lower return, I expect this will result in further yield compression within the data centre transactions.
For our team at DC Byte, we’ll continue to focus on improving our Analytics platform to keep up with the rapid changes in the industry, and at the same time identify new datasets that will be important for data centres in the future. Moving into 2025, the team looks forward to sharing these features with our clients:
- For suppliers of data centre products and services, we now track which companies from different verticals are associated with individual projects.
- Pricing Sentiment – our first qualitative survey of forward-looking opinions on colocation rents.
- To support our investor, operator and developer customers, the team has added Deal Data and Comparables in addition to colocation rents.
Keen-eyed viewers will also notice that we have significantly increased the amount of information available in Researchers Notes in line with our presumption of transparency approach. We recognise that the industry is making billions of dollars’ worth of decisions based on our insights – so we want to provide the raw insights and also, the rationale behind them. And this means welcoming scrutiny and feedback and being more collaborative with the industry when it comes to our research.
As we close out 2024, we extend our gratitude to our incredible team, clients, and partners for making this year so successful. Here’s to another exciting year in digital infrastructure – because too much demand is, after all, a great challenge to have!
